Out-Law / Your Daily Need-To-Know

Number of M&A deals involving UK companies at 'historic low', says ONS

08 Jun 2016, 4:08 pm

The number of mergers and acquisitions (M&As) involving UK companies remains at a "historically low level", according to the Office for National Statistics (ONS).

But the total value of transactions where UK companies have bought other UK companies is at its highest since 2008, and the total value of deals where foreign companies bought UK ones is at its highest since 2007.

New data published by the ONS shows that there were 114 completed acquisitions and disposals involving UK companies in the first three months of the year. The figure includes domestic and cross-border deals, where a UK company is either the target or buyer, and reflects all M&A transactions involving UK companies during the period where the value of the deal was £1 million or more.

Deal activity fell during the economic recession in 2008 and has not recovered to previous levels since, according to the data.

"Global merger, acquisitions and disposals activity is often driven by the availability of credit and company profits, as well as a sense of confidence in the economic outlook," the ONS said. "The majority of large M&A transactions involve some element of borrowing or leveraging. Therefore when credit conditions deteriorate, as happened in the 2008 to 2009 economic downturn, M&A activity declines. On the other hand, the process of completing an M&A transaction takes time and sometimes there is a lag between improving economic conditions and any quarter-on-quarter increase in M&A activity."

According to the latest data, there were 57 deals completed involving UK companies buying other UK businesses between the beginning of January and the end of March this year. Those domestic deals had a total value of £11.6 billion, which was the highest recorded deal value figure for any three month period since the final quarter of 2008. M&A deals concluded in that period had a total value of £18.2bn.

UK companies were acquired by foreign businesses in 29 cases during the first quarter of 2016 in deals worth £49.4bn in total. The ONS said that that total value of inward M&A transactions involving UK companies is the highest since the second quarter of 2007. The total value for all inward M&A deals involving UK companies for the whole of 2015 was £33.3bn, with a third of that value accounted for by deals involving US buyers.

According to the ONS, UK companies made 22 successful acquisitions of foreign businesses between the beginning of January and end of March. The total value of those deals exceeded £6bn.